To put it simply, a breach of contract is the result of a party to a valid contract failing to fulfill their side of the agreement. The terms contained within a contract are what instructs the parties in what they must do, and how they are to do it, in order to maintain their promise. If a party does not adhere to what the contract instructs them to do, the non-breaching party will be allowed to take legal action against the breaching party. This can include filing a lawsuit against them in court.
A breach of contract can be either partial or complete. A court will also determine whether the breach was a substantial breach, or only minor. Doing so assists the court in determining what sort of damages the breaching party should have to pay to the non-breaching party in order to remedy the situation.
Below are the most common questions regarding contract breaches.
Will I Always Be Held Liable If I Breach a Contract?
A breach of contract may be excused under specific circumstances. One such example would be when the contract is found to be void, and therefore unable to be legally enforced. Contracts may become void if they:
- Are against prevailing public policies;
- Are severely one-sided, to the point in which it is clearly unfair to one of the parties;
- Involve illegal activities or crimes;
- Were agreed to by parties who are not competent to contract, such as minors;
- Are impossible to perform; and/or
- Restrict certain rights, such as the right to work.
A contract containing any of these elements would be considered “void on its face.” What this means is that the contract is voided as written, and cannot be changed or amended. Generally speaking, the court will cancel these contracts entirely.
Because the law treats a void contract as though it had never been entered into, no one will be held liable for breaching the contract. No damages would be available for breaching a void contract because, essentially, there was no contract to breach.
What If the Agreement Is Not a Valid Contract?
This would be similar to a void contract. In order to form a legally enforceable and valid contract, there must be:
- An Offer: A party must offer to make an agreement;
- Acceptance of the Offer: Generally speaking, the acceptance must be expressed, but may also be implied;
- Intent: If one party did not intend to enter into an agreed upon exchange, the transaction may be treated as a gift as opposed to a contract; and
- Consideration: This refers to the exchange of valued goods or services.
If one of these elements is lacking, then the contract is not enforceable because the law determines that there is no contract to be enforced. Additionally, if any of the voiding factors that were mentioned above are present, the agreement is not considered to be valid and would not be enforced.
What If a Contract Is Not In Writing?
A contract can be either oral or written; however, oral contracts are more challenging to enforce. Because of this, oral contracts should be avoided whenever possible. Much like a written contract, the parties enter into an agreement to either do or not do some obligation. The first and most obvious difference between written and oral contracts is that an oral contract is a verbal agreement. The second difference is that oral contracts are spoken. This means that there is no further proof that a contract was created, other than the parties or witnesses who heard it being created.
Because of this, courts prefer that parties formalize their agreements in writing with a written contract. If a future dispute arises over the terms of the contract, there is concrete proof demonstrating what the parties agreed to.
Some contracts must be written in order to be considered valid, such as contracts that involve a significant amount of money (generally greater than $500). The Statute of Frauds describes a law which requires contracts be in writing, and describes the types of contracts that must be in writing. Legally unenforceable oral contracts include:
- Contracts involving the sale or transfer of land;
- Promises to pay someone’s debt obligations;
- Contracts that cannot be completed within one year of their creation, according to the terms of the contract;
- Contracts involving the sale of goods for more than $500; and
- Contracts that extend past the lifetime of the one performing the contract.
What If the Contract Is Not What I Agreed To?
Sometimes, the contract being enforced may not reflect the true, original intentions of the parties. One party would need to prove that other agreements were made outside of the contract, and that those agreements change the fundamental nature of the original contract. Because the current agreements between the parties are fundamentally different from what either party initially agreed to, their conduct could not be considered enforceable under the terms of the original contract. This is a common defense commonly used where a contract does not contain a merger clause.
A merger clause is also known as an integration clause. This clause prevents a party from claiming that the contract does not reflect the complete understanding of the parties after the contract was formed. A typical merger clause will say, “this agreement contains the entire agreement of the parties.”
Can a Contract Be Voided If One Party Was a Minor? When Else Can a Contract Be Voided?
Generally speaking, minors cannot enter into contracts. Most states dictate that someone is a minor if they are under the age of eighteen. As such, if a minor signs a contract but later wishes to withdraw, they usually can without being held liable for a breach of contract. If you are contracting with a minor, it is advised that you have the minor’s parents sign the agreement in order to potentially avoid entering into a voidable agreement.
Additionally, a contract may be rendered unenforceable if one of the parties lacked mental capacity. What constitutes sound mental capacity will vary from state to state. Some courts may look at whether the person understood what they were doing at the time of contract creation. Other courts will consider whether the person had control over their actions at the time of contract creation.
Duress occurs when a person is influenced to sign a contract under extreme pressure. This is often a threat of violence or bodily harm. Undue influence occurs when the dominant party exerts excessive pressure on the weaker party to sign a contract. Evidence of either would render the contract void and unenforceable.
What If Someone Commits Fraud or Misrepresentation in Creating a Contract?
In general, a party engages in fraud when they misrepresent a material fact for the purpose of inducing another party to act, or refrain from acting. People alleging contract fraud must prove that the person making the fraudulent representation knew, or should have known, that:
- The claim was false;
- They intended for the other party to rely on their false claim; and
- The party did in fact rely on the false claim, which resulted in damages.
If the party alleging contract fraud is able to prove the above elements, the contract will be considered void and unenforceable.
What Happens If There Is a Mistake in Creating the Contract?
In a legal context, a mistake occurs when parties have an incorrect belief about a fact upon entering into a contract. If only one party is mistaken, it is referred to as a unilateral mistake. Generally, contract performance will not be excused due to a unilateral mistake. If both parties share an incorrect belief, it is called a bilateral mistake. A will generally be voidable because of a bilateral mistake.
It is important to note that a unilateral mistake does not apply if one party misleads the other party. This would be considered fraud or misrepresentation, as previously discussed. Additionally, unilateral mistakes could make a contract voidable if:
- One party to the contract fails to disclose information which is only known to that party; and
- A reasonable person could not discover that information on their own.
What Happens When Circumstances Change?
When something occurs making it impossible to perform the duties of the contract, the parties may be excused from their performance of the contract. However, just because the event rendered performance of the agreement more difficult does not mean that performance would be impossible. One party may also be excused from their performance when an important, overriding event has frustrated the purpose of the contract.
Do I Need an Attorney for Breach of Contract Issues?
If you are involved in any sort of contract dispute, such as a breach of contract, you should consult with an area contract lawyers. An experienced and local business attorney will best understand your state’s laws regarding contracts, and how those laws will affect your legal options. Finally, an attorney will also be able to represent you in court as needed.